The nation’s second largest lender also announced a $2.5 billion capital raising that would help it meet regulatory capital requirements and react to any litigation related to issues that forced a near $1 billion provision for customer remediation.
Westpac, whose net profit slipped 16 per cent to $6.78 billion, cut its final dividend from 94 cents to a fully franked 80 cents after what chief executive Brian Hartzer said had been a disappointing year.
The last time Westpac cut its dividend was at the end of the 2009 financial year, when the sector was reeling from the global financial crisis.
“This decision was not easy as we know many of our shareholders rely on our dividends for income,” the bank said in a release on Monday.
“However, we felt it was necessary to bring the dividend payout ratio to a more sustainable medium term-range given the capital raising and lower return on equity.”
Hartzer said the bank had suffered from a low-growth, low interest rate environment, while it was also weighed down by the $958 million customer remediation provision – related to issues including fees for no advice and overcharged loan interest – as well as $172 million for the reset of its wealth business.
Westpac said it aims to raise $2 billion via a fully underwritten institutional share placement, and another $500 million via a non-underwritten share purchase plan to give it an increased buffer above APRA’s ‘unquestionably strong’ capital benchmark of 10.5 per cent.
The placement will be undertaken at a fixed price of $25.32, a 6.5 per cent discount on the last close and a 8.1 per cent discount to the adjusted five-day volume weighted average price.
The bank’s shares were last trading at $27.88 and are expected to remain in a trading halt until Tuesday as it completes its capital raising.
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